Wednesday, November 26, 2008

So the EU Commission has come up with its very own economic stimulus package. The only snag being that its not really its very own at all, as doesn't look like much more than the sum of its parts - the efforts already undertaken by individual member state governments.

It's basically the Commission sticking an EU label on national efforts and making lots of noise about coordination, so that it doesn't look as though it's been left out in the cold.

As PA writes:

Mr Barroso said national plans unveiled so far - including UK Prime Minister Gordon Brown's VAT-cutting package this week... would be considered as a contribution to the EU-wide effort being called for today.Thanks for that.Still, there are a few things in there to be welcomed - for example, a proposal to spend €5 billion of unspent EU funds on energy infrastructure and broadband communications. There's also a proposed drop in VAT rates, with the Commission urging member states to agree EU-wide proposals lowering rates for "green" products and services in the building sector. Another one is giving national capitals "permission" to temporarily break budget deficit ceilings if needed.

But rather than actually doing very much, the Commission's plan seems mostly about "allowing" member states to act more independently on issues where they probably ought to have more freedom anyway.

I've just been asked whether the EU is a help or a hindrance for the UK's efforts to get out of the recession. It seems a bit like it can be a help, but only by undoing the things which currently make it a hindrance - i.e. by giving member states back some freedom to do what they have to do. The only other thing it can do that involves actually using its powers instead of letting them go a bit, is to regulate. And we all know what a hindrance that can turn out to be.

EU Communication Commissioner Margot Wallstrom’s blog is occasionally worth a read. Yesterday’s entry, ostensibly about the financial crisis, has some rather strange musings:

Can’t help thinking that the root causes of the economic crisis and the climate change crisis are very much the same : need, greed and feed.

Poor peoples’ need for housing in the US, speculators greed for quick money, bonuses and wealth in Wall Street and similar places, the willingness from the rest of the world to “feed” the American economy with loans/cheap money.

The short-range approach, the unwillingness to realise that – as with banknotes- nature can not just be endlessly reprinted or copied, the overexploitation of natural resources has led to a situation where we lose biodiversity at a scary speed – and at a very high cost. And even the golden boys working with “blanking” (speculation in ups and downs on the stock market) depend on photosynthesis to stay alive on this amazing little globe…

Monday, November 24, 2008

On Friday I went to Paris for what was billed a "very special birthday party" - the 35th anniversary of the Eurobarometer (what, you missed it?)

Well it was worth it. Not in a fun way - more in the sense that it was an invaluable insight into the Commission's attitude to the latest 'no' vote.

When I walked in I was handed a nice canvas briefcase (full of stationary) which would otherwise prove useful in future were it not for the '35th Eurobarometer anniversary' logo on the front. Good to see the Commission is still rolling out the expensive taxpayer-funded propaganda in these times of recession...

Despite expecting it to a certain extent, the message of the whole thing was still alarmingly patronising. The dominant theme was that the Irish did not know what they were doing. In 8 hours of conference and 23 speakers, plus comments from the floor, there was not a single suggestion that anyone at all had voted no out of dissatisfaction with the EU's policies or its direction.

Everything was blamed on the EU's "communication problem."

The Commission and its supporters truly believe that no voter in their right mind has any valid reason whatsoever to want to question EU integration. Those who have voted no simply don't know anything about it, and clearly thought they had some kind of right to upset things in Brussels without consequence.

MEP and former EP President Nicole Fontaine said: "We have a communications problem... We haven't explained enough the benefits of European construction... We have been too modest."

French Europe Minister Jean-Pierre Jouyet confidently stated that "The Irish are very much in favour of Europe, but think they are badly informed." He said that "Europe's main problem" is that although Europeans share "common values", this has not lead to a "European consciousness" and "European citizenship."

Communications Commissioner Margot Wallstrom observed that "You cannot impose citizenship on people - it must come from democratic legitimacy". Er, isn't that what we've been saying all along? Isn't that exactly what the EU is now doing, by pressing ahead with the Lisbon Treaty, in spite of the no votes?

She said that in order to "build a feeling of belonging to the EU" we need to "engage and involve citizens in a much more democratic way." More referendums, then? No. According to Walstrom "Referendums... have built-in problems" for subjects as complex as treaties. Jouyet said: "Referenda... allow a populist demagological exploitation of people in a given setting."

According to Former EU Commission President Jacques Santer: "A referendum is good for democracy; it is not always good for a country. We need to make a distinction between democracy and what is good for the country."

Jacques-René Rabier, Founder of Eurobarometer and a former Director-General of the press and communication department, said that people needed to be made more aware of the EU's "common symbols" - the flag, the 9th May 'Europe Day' etc. Jouyet agreed, saying: "Symbols are necessary for Europe... they are the way to reach full European consciousness for the people. There is no identity without symbols."

At least Irish Europe Minister Dick Roche admitted that: "If any other member state had held a referendum on the Treaty, the same issues would have been raised and in many cases the same result." He said the Treaty was "mind-bogglying complex" and pointed out - quite rightly - that the EU must learn to speak to citizens in a language they understand. He joked, "The first thing to learn about referendums - is to avoid them."

He talked a lot about the "europhobic" side of the argument, and blamed the no vote on the fact that "42% of the Irish print media is now British-based" He said, "The British-based europhobic media came to exploit the referendum."

Claus Sorenson, Director General of the Commission's Communication department asked of the Irish: "Did people believe that voting no would be cost-free? Has it only just dawned on them that it is not cost free?" Wallstrom concurred: "They thought it would do them no harm."

Silly, silly voters.

No mention of people's feeling that the EU is undemocratic. No mention of the fraud, the waste, the lack of transparency. No mention of the problematic trade policy and unpopular CAP. No, the only thing wrong with the EU in the eyes of the Commission is that the people of Europe know nothing about the EU, and are therefore ungrateful for it.

Friday, November 21, 2008

Negotiations on the EU climate package may or may not be completed by the end of this year. Even if a political deal is done, the hugely important issue of which industrial sectors will receive 'preferential treatment' will still need to be resolved - this could take up to 2011, according to the terms of the directive.

This might sound like an arcane subject, but it will have profound implications for the very existence of certain heavy industries in Europe after the reformed Emissions Trading Scheme begins in 2013 - and by extension, the structure of global trade.

To say businesses are concerned is an understatement. For energy-intensive industries subject to high levels of international competition, this really is a matter of life and death. They will not be able to remain in Europe if they need to pay for carbon permits or shoulder significantly higher energy costs.

With the stakes this high, there will be a huge fight over which industries are given special protection by the EU.

The German Environment ministry has produced a very helpful graph on the subject (click to enlarge). Basically, the higher the 'trade intensity', the less potential for the sector in question to pass through a higher carbon price to consumers (because of the effects of steep international competition). When high trade intensity is combined with a high carbon cost (as a percentage of gross value added), this spells big trouble for the industy sector concerned.

Chemicals, paper, aluminium, steel, glass and fertilisers look particularly exposed, but many sectors will be affected.

What measures can be taken to stop industries going offshore? Handing out free carbon permits for these sectors is the preferred solution for the UK government. However, this poses problems for industries (such as aluminium and chemicals) for whom the main cost burden of carbon pricing is indirect - ie. as a result of higher electricity prices. Furthermore, this solution could just provide industry with an incentive not to produce in Europe. By scaling down production here, and shifting it overseas, companies would be able to sell off their freely acquired permits for a profit.

Working on the assumption that European governments do want to keep heavy industrial jobs in Europe, this makes it very likely that we are heading for 'border tax adjustments': new tariff barriers in plain English.

The possibility of introducing these 'green tariffs' is indeed very clearly written into the draft Directive, and is a solution favoured by a protectionist camp of countries led by France. As the German graph illustrates, there is a very wide range of industries which will want to stake their claim to EU 'protection'.

Green tariffs would of course need to be applied to all imported finished goods assembled from the basic industrial products in question.

There would be the hellish task of trying to work out the relative carbon value of cars, electronic equipment or toys manufactured from a number of different components, often in a number of countries with differing environmental standards... There will be a feeding-frenzy for lobbyists in Brussels, seeking to fill this 'information gap' and secure special treatment for their industry.

If there is one lesson we can take away from the 1930s, increasing tariff barriers and slowing down international trade a surefire way to turn recession into global depression.

The EU climate package is a driver of protectionism. It risks creating major economic distortions, new barriers to international trade and possible retaliatory tariffs from other trade blocs.

Point Carbon reports that prices for carbon permits within the EU ETS slumped 8 per cent yesterday, falling to 16 euros a tonne. The price will hit a floor between 12 and 14 euros per tonne, according to "several traders". This is less than half what the price of carbon was just five months ago.

It is probably true that carbon prices will not totally crash in the current phase of the ETS, as they did during the first phase of the scheme when a huge oversupply of permits meant they became worthless. But that is not really the issue any more. As we've argued again and again and again, price volatility such as what we're seeing now undermines incentives to channel long-term investment towards large-scale (often very capital-intensive) carbon saving projects and technologies.

Especially in the current climate, there is no way that the Chief Financial Officer of a large emitter can approach a bank asking for credit lines to fund new low carbon investment with any realistic expectation of what the price of carbon will be when the investment comes to be realised in 3, 5 or 10 years time.

Speaking to industry practitioners, this is the major structural failure in the EU Emissions Trading Scheme. It won't get any better in the next phase of the scheme (running from 2013 to 2020), even if all the political issues surrounding the basic structure of that trading phase are resolved soon (very unlikely).

As we've learned over the past few months, EU policymakers did not (and could not) predict economic slowdown and slumping carbon prices. And economic trends are only one element amongst many others (weather, politics, technological change) which drive carbon prices. The managing authorities of cap and trade schemes like the ETS will never have the knowledge to be able to allocate the right number of permits in order to create a stable carbon price. So there's no telling what could be happening in carbon markets in ten years time - and that is the fundamental problem.

“launch a follow-up communication Plan D, as well as a new set of Plan D civil society projects, with the overall objective of supporting the ratification process for the Reform Treaty and the increasing participation in the 2009 European Parliament elections.”

It even suggests the "identification of aspects of school education where joint action at EU level could support Member States".

The Commission earnestly declares that "We need to empower citizens" in order to "promote active European citizenship".

It then goes on to make the astonishing assertion that:

"There is an underlying conviction amongst European citizens that our societies can only tackle today's challenges by working on a European scale. This shift in the purpose and focus of the EU thus fits well with the aspirations of citizens."

This notion is presumably derived from the notoriously skewed Eurobarometer polls - which invariably return exactly the 'right' result for the Commission (for more, see the Economist's excellent critique on Eurobarometer).

No surprise then that the Commission's document notes the imporance of "strategic" use of these surveys:

"The Commission will introduce innovations in the methods used by the Eurobarometer in response to the White Paper consultation to increase its ability to listen and respond to public opinion. The goal is to use surveys more strategically in relevant phases of the policyprocess"

The Commission apparently thinks it's acceptable to assign legitimacy to awarding itself more power on the basis of its own private polling. But if the transfer of powers to Brussels is rejected in a direct public vote which cannot be managed or controlled (as in Ireland, France or Holland), the result is apparently illegitimate.

Just a thought: instead of spending taxpayers' money trying to construct artificial legitimacy for its actions, perhaps the EU would 'engage with citizens' far better by ceasing to legislate in secret, publishing minutes of meetings, or perhaps paying attention to occassions when people actually get the chance to vote against further transfer of powers to unaccountable, distant institutions?

This won't cost a penny. But something tells us it won't be happening any time soon...

Wednesday, November 19, 2008

As if bullying Ireland into reversing its democratically stated position on the Lisbon Treaty wasn't enough, out of touch MEPs have now upped the pressure on the Irish government to hurry the whole process up - entirely for their own benefit, of course.

According to European Report, the European Parliament's Constitutional Affairs Committee has adopted a resolution stating "the need for member states to ratify the text as soon as possible". It insists that "all efforts be undertaken to ensure the treaty's entry into force before the European elections of June 2009".

The motion will be voted on by the plenary on 3 December, just in time for the EU summit on 11 and 12, when Irish PM Brian Cowen is due to present his "solution" to the Irish no vote.

Thursday, November 13, 2008

There have been widespread fears for some time that the Large Combustion Plants Directive, which will force the shutdown of nine oil and coal-fired power plants by 2015, will raise the possibility of blackouts in Britain.

A survey of energy experts by the BBC has reconfirmed this fear. Although the shutdown of such a large amount of coal capacity obviously does raise the risk of the lights going out, what is most likely to happen is the rapid construction of new gas plants (which can be brought online in just a few years) to fill the generation gap. But even higher gas dependency is in itself bad news for energy security and the availability of cheap power.

Whatever happens, it is pretty clear that this Directive is a huge problem for the UK's already strained energy infrastructure.

At a conference yesterday organised in Brussels by the Major Energy Users Council, many participants were deeply concerned over the Large Combustion Plant Directive, raising the question of whether the British government should refuse to comply with the directive, or perhaps negotiate a special dispensation.

One important point that arose was that, although the Directive works towards a 2015 deadline, the British Government will have to make a decision very soon indeed if it wants to try and go down this route.

This is because, as a result of the LCPD, power generation companies are unlikely to invest to maintain the plants in the run-up to 2015, and may even begin to 'cannibalise' parts of the equipment. This means that the damage to UK coal plants may already have been done within a few years, meaning that they will not be able to stay open in any scenario - even if the Government attempted to withdraw from the LCPD in three or four years time.

Tuesday, November 11, 2008

Extraordinary story from Danish MEP Hanne Dahl. On a recent trip to Prague with a delegation from the European Parliament's constitutional affairs committee, ahead of the Czechs taking over the EU Presidency in January 2009, Dahl got to experience the more unpleasant side of the Lisbon Treaty fanatics. Hanne explains:

Naively I thought that it would be a courtesy visit. But no! I was really mistaken. The underlying agenda of my co-travellers turned out to be to try to threaten/scare/demean the Czech Republic into ratifying the Lisbon Treaty, before taking over the presidency. Now I also thought that one would follow certain rules for polite behaviour, while travelling as a representative of the EU. I was convinced that people would see themselves as some sort of diplomatic envoys, and thereby constrain themselves somewhat. I assumed so much, but I got wiser.

She goes on:

During the meeting with representatives from the Czech Parliament a Liberal British MEP started out by saying that he did not think that the Czech Republic could take over the presidency, if they had not ratified the Treaty...I thought it was quite rude that an MEP seemed to consider himself qualified to criticize a legitimate democratic process as a problem, and at the same time challenge the fundamental principle that all EU countries are equal. Who does he think that he is?

As we have noted before, the Czech ratification process is becoming increaingly more uncomfortable for the EU establishment.

Anyway, Hanne goes on. Having moved on to the Senate, the rather obnoxious delegation ran in to some resistence, as the Senate's European Affairs Committee began to to bite back. Dahl herself also joined the debate, and gave a speech highlighting six points which are central in the debate on the Lisbon Treaty in the Czech Republic, including the impact of the Charter of Fundamental Rights. She also noted, quite rightly, that the Czechs should be "proud to have such a self-conscious democracy".

This proved too much to bear for some of the delgates. Hanne describes:

This triggered a rage from the German conservative (EPP-ED) Elmar Brok. Not only could he not constrain himself from coming with outbursts during my speech – he also followed me around shouting terms of abuse at me, while we were supposed to have a tour of the castle. I politely but firmly said that he had by far crossed the line and ought to constrain himself.And while all of this happened I had reporter on the phone, who wanted to speak to me about this week’s huge victory in the protection of groundwater.

Try to picture this: A snorting, sweating and shouting German following a very pregnant woman around the Senate in Prague during an official visit. It was so embarrassing! Well not to me, but for the EU that thought that it had to lecture the Czech Republic on them not having the strength or the dignity to take over the presidency. Yes some even said that it would be best if they would just leave the presidency to the French for another term. They even threatened that it was just this kind of problems from a small country that could lead to the abolishing of the rotating presidency and the introduction of a permanent presidency, consisting of the six largest countries. I think it was a German who said it.

How charming. And what a way to convince people of the benefits of the Lisbon Treaty.

Wednesday, November 05, 2008

Set against the epoch-making events in America today, it may seem curiously mundane to focus our attention on EU employment regulation - specifically, the decision of a European Parliament Committee to push for the abolition of the British opt-out from the working time directive.

But this really is a huge, huge deal. It will be a major test of Gordon Brown's character, and his oft-repeated claim to be 'on the side' of British business and working families at a time of economic stress.

The Directive caps working time at 48 hours a week, but the British Government has made all sorts of horse-trading concessions over the past years to defend the UK’s partial exemption from these rules. The Government estimates that this arrangement is worth £9bn a year to the UK.

The opt-out remains to be voted on by all MEPs in December in the European Parliament plenary session, but this first vote in the Committee signals the way that vote is likely to go. After that happens, the issue will be passed on to the EU Council, where we will be in a majority voting situation. Sources familiar with the negotiations tell us that its difficult to see what leverage the UK will have in these negotiations. If Britain wants to keep the opt out, there will need to be some pretty serious horsetrading, either on this issue or on others.

If the MEPs get their way, it is absolutely clear that employees in Britain will suffer in a very direct way. As the Government has rightly pointed out, it is essential - particularly in a time of recession - that we maintain flexible labour markets.

If one earner in a family is made redundant, surely it is right that his or her partner can work extra hours in order to pay the bills? And when those bills are increasing, why shouldn't people try and work harder to help pay them? As for employers, already fighting against incredibly tough conditions, a cap on working time could literally be a matter of survival for their business.

The Government will be hugely embarrased by this: it had previously claimed that the right for UK workers to choose to work longer than 48 hours a week had been permanently secured as part of a ‘package’ deal on Agency Workers in June.

They shouldn't have given ground on either issue, particularly since both measures will have a massively disproportionate (and almost exclusive) impact on the UK. But having chosen to negotiate this package deal in the Council, making a huge concession in the process, the Government now finds itself being thrown back into negotiations - and probably having to make even more concessions. All because some MEPs didn't like the Council deal.

Why do MEPs think they have a right to do something like this? Who do these people claim to represent? It says a great deal about the European Parliament's distance from reality that only one in ten MEPs has any business experience whatsoever.

On a more fundamental level, the fact that the European Parliament is allowed to do something like this should make us think hard about the real value-added of the institution.

It should also make us reflect further on the failure of this Government's 'conciliatory'/ 'go with the flow' strategy towards EU negotiations.

As the jobless toll rises, Britain simply cannot afford to have tighter labour market controls forced upon it - a radically different approach is needed.

Tuesday, November 04, 2008

A subtle but telling sentence we just stumbled across in one of the EU Commission's glossy promotional pamphlets:

"The institutional process of updating the rules governing the relations between the member countries and the EU and between the EU and its citizens will continue. The issue of the Constitutional Treaty will be at the forefront of discussions in the years to come, regardless of the form and content of any text that will eventually be adopted."

Bear in mind that this was written in 2006, after the French and Dutch 'no' votes to the EU Constitution.

Another to add to the list of official admissions that the Lisbon Treaty is just a badly disguised version of the original Constitution.

A new poll in the Czech Republic released today shows that 55% of voters are against ratification of the Lisbon Treaty, which is expected to take place in Parliament in the first few months of next yer.

Not only that, but more Czechs are opposed to it now than at the beginning of the year.

European Parliament President Hans-Gert Pottering seems more than a little out of touch in his piece in the Guardian this morning:

It would be wonderful to think that the intense interest with which Europeans are following today's US presidential election might be matched by Americans watching the European parliamentary elections in June 2009.

Monday, November 03, 2008

On the blog of Belgian daily De Standaard, its EU correspondent Bernard Bulcke has some inside information on the plans to get the Lisbon Treaty passed.

It reports that a “very reliable source” has confirmed that “if the Lisbon Treaty hasn’t been ratified by the end of 2009, the Treaty will be integrated into the accession treaty for Croatia”.

It adds that “the probability of this scenario increases as the chances of Lisbon just being ratified through a second Irish referendum diminish”. This means that “the Irish would have to block the accession of Croatia in order to remain able to block Lisbon.”

And not only the Irish, because, as the article says, it is a “happy coincidence” that “the countries that aren’t that excited about the new treaty are exactly the greatest proponents of further enlargement of the European Union”, citing Poland and the Czech Republic, neither of which has ratified Lisbon.

The article reports that by 2009 all negotiations with Croatia should be concluded, but that this doesn't automatically guarantee Croatian entry. French President Sarkozy and German Chancellor Merkel have already indicated that the approval of Lisbon will be made a condition for enlarging the EU, effectively blocking the accession of Croatia until this happens.

Sarkozy’s claim that it would be impossible to enlarge without Lisbon is dismissed as “legal nonsense” by the piece, given that accession treaties always adapt the EU institutions to take account of new members. However, as the article points out, the claim nonetheless serves as a “political threat” directed at Ireland, Poland and the Czech Republic.

Integrating the Lisbon Treaty into the Croatian accession treaty certainly would make this 'blackmail' strategy against future enlargement carry more weight in terms of persuading more reluctant member states to ratify it.

And as we've argued before, opting for this plan will also mean that supporters of the Lisbon Treaty may be able to circumvent the Irish electorate. The "Croatian Accession Treaty plus Lisbon" could be ratified through the Irish Parliament, with a referendum held on various opt-outs. Even if the Irish referendum on the opt outs returns a no vote, the Constitution / Lisbon Treaty will still come into effect for everyone else.

On the other hand, the Croatian option would mean effectively re-ratifying Lisbon in other member states. This would be particularly unwelcome for a weakened Gordon Brown, especially if it happens in early 2010 - just before a General Election.

According to political and official sources in Dublin and Brussels, Cowen is likely to indicate to his fellow heads of government that the government will hold a second referendum next autumn, but only if it believes that such a vote can be passed.

Sainsbury's is challenging the EU to ditch its strict rules on the shape and size of fruit and veg, after it was told that a plan to sell Halloween 'zombie brains' cauliflowers, 'witches fingers' carrots and 'ogres toenails' cucumbers, as alternatives to sweets and chocolate, could result in individual employees being prosecuted under EU regulations.

"We have been struggling to fit a square peg in a round hole for too long now when it comes to conforming to the more controversial elements of the EU regulations. We're not allowed to use up to 20 per cent of what's produced in this country and in the current crunch climate, we cannot continue to waste this much food before it even leaves the farms. Buying wonky veg would have saved cash-strapped Britons up to 40 per cent on some items such as carrots. It not only saves money, it also reduces waste and supports our British farmers."

But don't worry - according to the Observer "The clamour for cheaper vegetables during the credit crunch has forced the EU to re-examine the regulations".

Except that, they only want to change the rules for 26 varieties. Oh, and the changes won't come into effect until July next year, by which time we could all be growing our own.

In Saturday's Independent, Vanessa Mock was quite excited about the "euro fever" that apparently is sweeping through Scandinavia in the wake of the financial crisis. There are anxieties, we are told, that the small Scandinavian currencies are "dangerously over-exposed to market vagaries."

Danish PM Anders Fogh Rasmussen is quoted saying that Denmark should be joining the eurozone "as soon as possible", complaining about high interest rates and Danes feeling left out. Swedish Europe Minister Cecilia Malmstrom echoes Rasmussen's remarks: "It makes no sense whatsoever for us to stay out and if we could hold a referendum tomorrow, we would."

These can no doubt serve as powerful political arguments against the backdrop of turbulent times, but euro fever? Hardly.

Rasmussen and Malmstrom are saying what they've always said. Certainly, the Danish government was talking about a eurozone referendum long before the financial crisis hit.

Meanwhile, the Swedish opinion poll that, according to the Independent, marks "a major turn-around in public opinion", shows that 47% of Swedes would vote against the euro, 42% in favour, and 11% are uncertain. In other words, of those who do know, 53% would vote No, compared to 56% in the 2003 referendum. This is a shift, but not "a major turn-around".

And, crucially, Swedish PM Fredrik Reinfeldt has said that he has no plans of bringing up the issue in the near future. According to Svenska Dagbladet he said recently that "We have to remember that we asked the Swedish people - they heard the arguments for and against [euro membership] and voted No".

Having said all that, however, it's of course close to a universal truth that when it comes to EU-related referendums, politicans have a curious habit of going back on their word. And if Denmark calls a referendum, the pressure on Sweden will certainly grow. A number of factors - most of them having something to do with the Social Democrats - will determine both whether a referendum is called and the outcome.